Published by Global Banking & Finance Review®
Posted on March 4, 2026
5 min readLast updated: April 2, 2026
Add as preferred source on GoogleA U.S. submarine sank the Iranian frigate IRIS Dena off Sri Lanka, intensifying the Strait of Hormuz crisis. The waterway remains effectively closed, stranding around 200 compliant tankers and prompting steep oil price volatility amid raised forecasts and insurance pullbacks.
By Jonathan Saul, Anna Hirtenstein and Yousef Saba
March 4 (Reuters) - The U.S.–Iran war widened on Wednesday after a U.S. strike hit an Iranian warship off Sri Lanka, deepening a crisis that has paralysed shipping through the Strait of Hormuz for a fifth day and choked off vital Middle East oil and gas flows.
The U.S. submarine strike on the Iranian vessel came as U.S. President Donald Trump pledged to provide insurance and navy escorts to ships exporting oil and gas from the Middle East in a bid to contain soaring energy prices.
At least 200 ships, including oil and liquefied natural gas tankers as well as cargo ships, remained at anchor in open waters off the coast of major Gulf producers including Iraq, Saudi Arabia and Qatar, according to Reuters estimates based on ship-tracking data from the MarineTraffic platform.
Hundreds of other vessels remained outside Hormuz unable to reach ports, shipping data showed. The waterway is a key artery for around a fifth of the world's oil and LNG supply.
At least eight vessels have suffered have been hit in the area since the Iran conflict began on Saturday. On Wednesday, the Maltese-flagged container ship Safeen Prestige was damaged by a projectile as it sailed toward the northern end of the Strait of Hormuz, prompting the crew to abandon ship, British navy agency UKMTO said.
Marshall Islands crude oil tanker Libra Trader and Panama-flagged bulker Gold Oak also sustained minor damage some 7-10 nautical miles off the United Arab Emirates port of Fujairah early on Wednesday, UKMTO said later.
The Libra Trader experienced a loud blast and debris from an unknown projectile, while the Gold Oak was struck by a projectile, though neither vessel sustained major damage or crew injuries, the agency added.
Qatar will fully shut down gas liquefaction on Wednesday and won't return to normal production and exports for at least a month, two sources familiar with the matter told Reuters. Gas giant QatarEnergy declared force majeure on shipments of LNG after attacks on its production facilities.
Iraq cut its oil production as the country ran out of storage, unable to load it on tankers. Saudi Arabia, the UAE and Kuwait were also struggling to load oil but it was not yet clear if they cut output.
RARE TANKER TRANSIT AMID SHIPPING FREEZE
Despite the gridlock, a rare voyage took place on Tuesday when the Suezmax tanker Pola sailed through the Strait of Hormuz to the UAE to load crude, according to industry sources and LSEG ship-tracking data.
The Pola had switched off its AIS transponder late on March 2 as it approached the Strait and reappeared the next day off Abu Dhabi.
Trump on Tuesday said he had instructed the U.S. International Development Finance Corporation to provide political-risk insurance and financial guarantees for maritime trade in the Gulf.
"No matter what, the United States will ensure the free flow of energy to the world," he wrote in a social media post.
Commercial war risk insurance costs have soared at least five-fold in recent days.
"Rates have increased from levels that owners and charterers will be used to," said Angus Blayney with insurance broker Gallagher.
"The cost will vary depending on the vessel type, cargo and routing, however marine insurers are very much continuing to provide cover."
Oil prices dipped on Wednesday, but were up 12% since the war started on Saturday, as U.S.-Israeli strikes on Iran disrupted Middle East supplies.
On Wednesday, Goldman Sachs raised its forecast for Brent crude oil in the second quarter by $10 to $76 per barrel. It also raised its prediction for WTI by $9 to $71 per barrel.
The bank said it sees longer-than-expected disruption to exports of oil and gas through the Strait of Hormuz and damage to oil production facilities as risks. It also assumes that low oil flows through Hormuz will lead to large declines in OECD inventories and Middle East production in March.
"Providing protection for all tankers operating in areas currently threatened by Iran is unrealistic as this would require a very high number of warships and other military assets," said Jakob Larsen, chief safety and security officer with shipping association BIMCO.
ASIA SCRAMBLES FOR REPLACEMENT BARRELS
Some Asian refiners and petrochemicals companies face output cuts because they are unable to get prompt replacement cargoes from their suppliers in the Gulf due to the shipping standstill.
India's Mangalore Refinery and Petrochemicals and Petronet LNG both issued force majeure notices due to the disruptions.
Asia sources 60% of its oil from the Middle East, leaving the region vulnerable to the disruptions. Refiners in Indonesia and Japan are sourcing more oil from the U.S. to replace the shortfall. India will consider buying more from Russia, sources at two companies have said.
Saudi Aramco's largest domestic refinery and key crude export terminal Ras Tanura was struck on Wednesday, four sources said.
(Reporting by Jonathan Saul; Additional reporting by Renee Maltezou; Writing by Anna Hirtenstein; Editing by Louise Heavens, Aidan Lewis)
Hundreds of oil and LNG tankers are stranded or delayed, paralyzing Middle East energy exports for a fifth day.
The US hit an Iranian warship off Sri Lanka and pledged insurance and navy escorts for oil and gas shipments.
Qatar suspended gas output, Iraq cut oil production, and Saudi Arabia, the UAE, and Kuwait also faced challenges loading oil.
Refiners in Indonesia and Japan are turning to US oil, while India may buy more from Russia to replace the shortfall.
Oil prices surged 12% since the conflict began, with major banks raising price forecasts due to prolonged supply disruption.
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